Fonterra suppliers continue to support the dairy giant's overseas expansion strategy, but their council is nervous the melamine issue in China may have eroded farmer confidence.
In the Shareholders Council's annual review of the company's performance, council chairman Blue Read said the melamine issue was devastating for the victims and their families, but the council was worried the experience could erode farmers' confidence in the co-operative.
During the year, Fonterra also withdrew its capital-restructuring proposal, and the council fears uncertainty over that, plus the melamine contamination of milk supplies in China, could have a wider impact.
"Without the unequivocal support and confidence of supplying shareholders for the leadership and the direction of the business, implementation of Fonterra's strategy may be jeopardised," the council said in its report.
Commenting on the melamine contamination, the council extended its sympathies to the victims and their families, but said it was disturbed Fonterra's name was associated with the issue.
"Fonterra farmers are proud of what our co-operative stands for. The board has ultimate responsibility for protecting Fonterra's name, brands and reputation."
Mr Read declined in an interview to comment further about the melamine issue but said it was imperative Fonterra look for opportunities outside New Zealand to grow.
"There is not much growth left in New Zealand. The way to grow the business is to implement its strategy overseas."
